Caso

José Javier Orellana García.

Monopolistic Competition

Monopolistic competition is a market of imperfect competition where many competing producers sell products that are differentiated from one another, where firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In this market firms can behave like monopolies in the short run, including by using market power to generate profit. The characteristics in this market are:

* There are many producers and many consumers in the market, and no business has total control over the market price.

* Consumers perceive that there are non-price differences among the competitors' products.

* There are few barriers to entry and exit.

* Producers have a degree of control over price

A few examples of monopolistic competition are:

* Movies is one example of monopolistic competition, because each producer creates its own film, wich has its own drama wich is what it makes people (consumers) decide rather to watch it or not.

* Toothpaste and toilet paper manufacturers often engage in monopolistic competition practices. Rather than change the products themselves, producers change the packaging, the design, or simply claim through advertising that their product is best.

* The restaurant industry is another example of monopolistic competition, especially in the fast food industry in which all services are basically the same, but are marketed differently, and there exists a perception that some fast food restaurants must be better than others.

* Cd´s are another example of monopolistic competition, because each artist creates their music, and the decide how to sell their album, the price, the design. Where to sell it, and everything they want to do, so the consumer buy and like their music.

After understanding what the monopolistic competition, we can analyze the advantages of this type of market.

Products cannot be substituted...